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Auditing & due dilligence

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When undertaking due diligence, or indeed traffic and revenue forecasting for concession bidders, it is important to assess the risk inherent in the traffic and revenue forecasts. Our approach is to use scenario planning as the principal assessment tool with a broad range of sensitivity testing. In addition we would also develop a 'Stress Case' scenario.

Whilst we have used probability analysis models (Monte Carlo simulation) to assess risk, we have two concerns with regard to their use; firstly these models (e.g. @risk developed in Excel) require a simplified representation of the traffic model to be modelled in Excel to carry out the analysis, this often distorts the analysis because Excel is not capable of modelling traffic conditions in complex situations; and secondly, many of the factors affecting the traffic and revenue forecast lie external to the traffic model, e.g. GDP per capita, car ownership and development type issues.